Question 1

If all the commercial banks in the banking system collectively have $300 million in cash reserves and are satisfying their target reserve ratio of 20%, what is the amount of deposits they have?

Accepted Answer

A)   $0
B)   $60 million
C)   $600 million
D)   $1500 million
E)   $2000 millionF) B) and C)
G) B) and E)

Question 2

When metal coins, such as gold and silver, were used as money, a technique which helped to prevent the reduction of their value through clipping was

Accepted Answer

A)   basing.
B)   re-minting.
C)   milling.
D)   debasement.
E)   sweating.F) A) and D)
G) A) and C)

Question 3

Consider a new deposit of $10 000 to the Canadian banking system. The bank that initially receives this deposit will find itself with

Accepted Answer

A)   no excess reserves if there is no reserve requirement.
B)   $1000 of excess cash reserves if its target reserve ratio is 10%.
C)   $2000 of excess cash reserves if its target reserve ratio is 10%.
D)   $8000 of excess cash reserves if its target reserve ratio is 20%.
E)   $10 000 of excess cash reserves if its target reserve ratio is 100%.F) B) and C)
G) B) and D)

Question 4

Which of the following is an example of the use of money as a medium of exchange?

Accepted Answer

A)   Dave keeps $250 in his drawer for a ʺrainy day.ʺ
B)   Mike gets a friend to give him a beer today in return for promising to give the friend two beer when Mike gets paid at the end of the month.
C)   Judy lends her car to a friend who signs a promissory note that she will pay Judy $10 a day for the use of the car after she returns the car to Judy.
D)   Barry pays $275 with his bank debit card for tickets for an NHL play -off game.
E)   ABC Investments Inc. enters in its account books that it owes Nallai $20 for his last monthʹs investment income.F) D) and E)
G) A) and E)

Question 5

Other things being equal, a rise in the price level will

Accepted Answer

A)   increase the value of money.
B)   decrease the purchasing power of money.
C)   stabilize the value of money.
D)   increase the purchasing power of money.
E)   have no effect on the value of money.F) All of the above
G) C) and D)

Question 6

The largest component of the liabilities of the Bank of Canada is

Accepted Answer

A)   Government of Canada securities.
B)   Government of Canada deposits.
C)   Canadian currency in circulation.
D)   deposits of commercial banks and other financial institutions.
E)   loans to private individuals.F) A) and E)
G) B) and D)

Question 7

Consider the following list of entries that might appear on the balance sheet of a commercial bank. All figures are millions of dollars.  TABLE 26-1
-Refer to Table 26-1. What are the total liabilities on the balance sheet of this commercial bank?

Accepted Answer

A)   2410
B)   2520
C)   2810
D)   2960
E)   3160F) B) and D)
G) None of the above

Question 8

When you pay for your $74 purchase at the grocery store with a debit card, you are

Accepted Answer

A)   transferring $74 of currency from your bank account to the grocery storeʹs bank account.
B)   withdrawing $74 from your bank account with which you pay for your groceries.
C)   transferring your claim on $74 worth of gold to the grocery store.
D)   electronically transferring $74 of deposit money from your bank account to the grocery storeʹs bank account.
E)   essentially promising the grocery store that your bank will pay them $74 at the end of the month when debts are settled.F) B) and C)
G) A) and E)

Question 9

The functions of the Bank of Canada include

Accepted Answer

A)   acting as the lender of last resort for the largest private corporations.
B)   acting as banker for the commercial banks.
C)   regulating both the money market and stock market.
D)   setting the exchange rate for the Canadian dollar on world markets.
E)   providing deposit insurance at Canadian commercial banks.F) A) and B)
G) A) and C)

Question 10

TABLE 26-2
-Refer to Table 26-2. What are the income-earning assets for Bank North?

Accepted Answer

A)   Reserves
B)   Loans
C)   Deposits
D)   Capital
E)   LiabilitiesF) B) and D)
G) A) and C)

Question 11

Canadian commercial banks maintain their reserves in the form of

Accepted Answer

A)   cash in their bank vaults and deposits at the Bank of Canada.
B)   cash in their bank vaults.
C)   gold in their bank vaults.
D)   deposits at other commercial banks that are immediately accessible.
E)   cash and foreign currency at the Bank of Canada.F) A) and E)
G) C) and E)

Question 12

Until recently, and for many years, the common definition of the money supply used by the Bank of Canada was M1, which included currency in circulation plus

Accepted Answer

A)   chequable deposits at the chartered banks.
B)   chequable deposits and savings accounts at the chartered banks.
C)   savings accounts and demand loans.
D)   term deposits and money market funds.
E)   chequable deposits at all financial institutions.F) B) and C)
G) A) and B)

Question 13

Consider the following situation in the Canadian banking system:
∙ An investment dealer withdraws $10 million from its account at Bank XYZ to purchase government securities from the Bank of Canada.
∙ As a result, $10 million has been withdrawn from the Canadian banking system.
∙ The target reserve ratio for all banks is 10%.
∙ All commercial banks operate with no excess reserves.
∙ There is no cash drain.
TABLE 26-5
-Refer to Table 26-5. Bank XYZ is immediately in a position to

Accepted Answer

A)   decrease its loans by $100 million.
B)   decrease its loans by $10 million.
C)   decrease its loans by $9 million.
D)   increase loans by $9 million.
E)   increase loans by $10 million.F) A) and E)
G) B) and D)

Question 14

Suppose a commercial bank has a level of target reserves of $500 million and actual reserves of $575 million. This bankʹs is/are $75 million.

Accepted Answer

A)   profits
B)   fractional reserves
C)   excess reserves
D)   reserve ratio
E)   cash drainF) A) and E)
G) C) and D)

Question 15

Which of the following statements about deposit money is true?

Accepted Answer

A)   The quantity of fiat money in the Canadian economy far exceeds the quantity of deposit money.
B)   Deposit money can legally be created solely by the Bank of Canada.
C)   Deposit money is the paper money or coinage that is decreed by the government to be accepted as legal tender.
D)   Deposit money is recorded as an asset on the balance sheet of a commercial bank.
E)   The quantity of deposit money in the Canadian economy far exceeds the quantity of fiat money in circulation.F) All of the above
G) C) and E)

Question 16

Suppose Bank ABC has a target reserve ratio of 10%, no excess reserves, and it receives a new deposit of $500
000)  This bank will initially expand its loans by

Accepted Answer

A)   $50 000.
B)   $450 000.
C)   $500 000.
D)   $4.5 million.
E)   $5 million.F) B) and E)
G) B) and D)

Question 17

In recent years, the use of debit cards issued by commercial banks has skyrocketed. When you pay for a purchase at a store using a debit card, you are

Accepted Answer

A)   authorizing the transfer of cash from your bank account to the merchantʹs bank account.
B)   creating an electronic debt to the merchant.
C)   authorizing an electronic transfer of a money substitute from you to the merchant.
D)   authorizing an electronic transfer of deposit money from you to the merchant.
E)   authorizing the transfer of bank notes from you to the merchant.F) C) and D)
G) A) and E)

Question 18

If the Bank of Canada enters the open market and purchases $1000 of government securities, what will be the eventual change in the money supply given a 10% target reserve ratio in the commercial banking system?

Accepted Answer

A)   decrease of $1000
B)   decrease of $5000
C)   decrease of $10 000
D)   increase of $5000
E)   increase of $10 000F) B) and C)
G) A) and E)

Question 19

TABLE 26-2
-Refer to Table 26-2. If Bank North receives a new deposit of $400, its actual reserve ratio immediately becomes

Accepted Answer

A)   7%.
B)   15%.
C)   25%.
D)   29%.
E)   35%.F) A) and E)
G) A) and C)

Exam 26: Money and Banking

Correct Answer
verified

Until recently, and for many years, the common definition of the money supply used by the Bank of Canada was M1, which included currency in circulation plus

Correct Answer
verified

TABLE 26-2 -Refer to Table 26-2. What are the income-earning assets for Bank North?

Correct Answer
verified

Other things being equal, a rise in the price level will

Correct Answer
verified

Suppose Bank ABC has a target reserve ratio of 10%, no excess reserves, and it receives a new deposit of $500 000) This bank will initially expand its loans by

Correct Answer
verified

Canadian commercial banks maintain their reserves in the form of

Correct Answer
verified

If all the commercial banks in the banking system collectively have $300 million in cash reserves and are satisfying their target reserve ratio of 20%, what is the amount of deposits they have?

Correct Answer
verified

Suppose a commercial bank has a level of target reserves of $500 million and actual reserves of $575 million. This bankʹs is/are $75 million.

Correct Answer
verified

In recent years, the use of debit cards issued by commercial banks has skyrocketed. When you pay for a purchase at a store using a debit card, you are

Correct Answer
verified

TABLE 26-2 -Refer to Table 26-2. If Bank North receives a new deposit of $400, its actual reserve ratio immediately becomes

Correct Answer
verified

When metal coins, such as gold and silver, were used as money, a technique which helped to prevent the reduction of their value through clipping was

Correct Answer
verified

Consider a new deposit of $10 000 to the Canadian banking system. The bank that initially receives this deposit will find itself with

Correct Answer
verified

Consider the following list of entries that might appear on the balance sheet of a commercial bank. All figures are millions of dollars. TABLE 26-1 -Refer to Table 26-1. What are the total liabilities on the balance sheet of this commercial bank?

Correct Answer
verified

When you pay for your $74 purchase at the grocery store with a debit card, you are

Correct Answer
verified

The functions of the Bank of Canada include

Correct Answer
verified

If the Bank of Canada enters the open market and purchases $1000 of government securities, what will be the eventual change in the money supply given a 10% target reserve ratio in the commercial banking system?

Correct Answer
verified

Which of the following statements about deposit money is true?

Correct Answer
verified

The largest component of the liabilities of the Bank of Canada is

Correct Answer
verified

Which of the following is an example of the use of money as a medium of exchange?

Correct Answer
verified

Exam 26: Money and Banking

Correct AnswerverifiedShow Answer

Until recently, and for many years, the common definition of the money supply used by the Bank of Canada was M1, which included currency in circulation plus

Correct AnswerverifiedShow Answer

TABLE 26-2 -Refer to Table 26-2. What are the income-earning assets for Bank North?

Correct AnswerverifiedShow Answer

Other things being equal, a rise in the price level will

Correct AnswerverifiedShow Answer

Suppose Bank ABC has a target reserve ratio of 10%, no excess reserves, and it receives a new deposit of $500 000) This bank will initially expand its loans by

Correct AnswerverifiedShow Answer

Canadian commercial banks maintain their reserves in the form of

Correct AnswerverifiedShow Answer

If all the commercial banks in the banking system collectively have $300 million in cash reserves and are satisfying their target reserve ratio of 20%, what is the amount of deposits they have?

Correct AnswerverifiedShow Answer

Suppose a commercial bank has a level of target reserves of $500 million and actual reserves of $575 million. This bankʹs is/are $75 million.

Correct AnswerverifiedShow Answer

In recent years, the use of debit cards issued by commercial banks has skyrocketed. When you pay for a purchase at a store using a debit card, you are

Correct AnswerverifiedShow Answer

TABLE 26-2 -Refer to Table 26-2. If Bank North receives a new deposit of $400, its actual reserve ratio immediately becomes

Correct AnswerverifiedShow Answer

When metal coins, such as gold and silver, were used as money, a technique which helped to prevent the reduction of their value through clipping was

Correct AnswerverifiedShow Answer

Consider a new deposit of $10 000 to the Canadian banking system. The bank that initially receives this deposit will find itself with

Correct AnswerverifiedShow Answer

Consider the following list of entries that might appear on the balance sheet of a commercial bank. All figures are millions of dollars. TABLE 26-1 -Refer to Table 26-1. What are the total liabilities on the balance sheet of this commercial bank?

Correct AnswerverifiedShow Answer

When you pay for your $74 purchase at the grocery store with a debit card, you are

Correct AnswerverifiedShow Answer

The functions of the Bank of Canada include

Correct AnswerverifiedShow Answer

If the Bank of Canada enters the open market and purchases $1000 of government securities, what will be the eventual change in the money supply given a 10% target reserve ratio in the commercial banking system?

Correct AnswerverifiedShow Answer

Which of the following statements about deposit money is true?

Correct AnswerverifiedShow Answer

The largest component of the liabilities of the Bank of Canada is

Correct AnswerverifiedShow Answer

Which of the following is an example of the use of money as a medium of exchange?

Correct AnswerverifiedShow Answer

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